WY Repurchasing 6.75% Notes – Analyst Blog

 

Weyerhaeuser Co. (WY) announced to repurchase all of its outstanding 6.750% notes at 8.0% above the issue value, due to mature on March 15, 2012. The offer price is $1,080 for each $1,000 note. In addition to the purchase price, Weyerhaeuser will pay an accrued interest on notes, calculated up to the settlement date.

 

Weyerhaeuser continues to pay down its debt and strengthen its balance sheet. At the end of the first quarter of 2010, the company had long-term debt of $5,671 million, down from $5,683 million at the end of fiscal year 2009. Weyerhaeuser’s cash and cash equivalents balance at the end of the first quarter was $2.1 billion versus $1.9 billion at the end of the previous quarter.

 

Weyerhaeuser is one of the leading US forest product companies, primarily engaged in growing and harvesting timber; manufacture, distribution, and sale of forest products; and real estate development and construction. The company is also in the midst of its conversion into a real estate investment trust (REIT), likely to increase its competitiveness in managing timber portfolio. These along with effective cost control initiatives, solid balance sheet, and robust guidance will lead to higher growth in the quarters ahead.

 

However, Weyerhaeuser’s positives are offset by concerns regarding the industry’s sensitiveness to macroeconomic conditions and its cyclical nature. Three of the company’s five business segments are highly dependent on the US housing market, which are still at their early stages of recovery, following the recent economic crisis.

 

Weyerhaeuser also faces stiff competition from Canfor Corporation, International Paper Co. (IP), and Louisiana-Pacific Corp. (LPX). We are currently maintaining a Neutral recommendation on Weyerhaeuser, in line with the Zacks Rank # 3(Hold).